What you need to take care of on Friday, December 16:
The US Dollar soared to fresh weekly highs against most major rivals, ending the day with substantial gains amid a risk-averse environment. The greenback rallied since early Asia, as China published discouraging macroeconomic figures.
The country reported November Retail Sales, which plunged by 5.9% YoY, while Industrial Production in the same period rose by 2.2%, below the 3.6% expected. The USD also benefited from hawkish US Federal Reserve Chairman Jerome Powell's hawkish words, reacting late to the US Fed's decision.
On Thursday, The Bank of England, the Switzerland National Bank and the European Central Bank announced their decisions. The three banks hiked rates by 50 bps, although they had different impacts on financial markets.
The UK MPC had quite a split vote, as out of the nine MPC members, 2 voted to maintain rates unchanged, 6 for a 50bps hike, and 1 for a 75bps hike. Also, the BOE removed the wording that "policy is not on a pre-set path" and the part on any changes to the "scale, pace and timing" to the bank rate will depend on the outlook. It was a dovish hike, and GBP/USD plunged, now trading at around 1.2280.
Meanwhile, the Switzerland National Bank also hiked rates by 50 bps to 1%, as expected, but market players ignored it. It is worth adding that Chairman Thomas Jordan noted that further rate hikes could not be ruled out.
Then, it was the turn of the ECB. The central bank delivered as expected. Additionally, Lagarde announced further quantitative tightening through the end of the APP program. The current portfolio will decline at a measured and predictable rate beginning in March 2023, announcing there won't be reinvestments of maturing securities. The monthly average decline will be €15 billion until the end of the second quarter of 2023.
Within the press conference, Lagarde said that policymakers expect to raise rates "significantly further" because inflation is far too high, adding that it is "obvious" that more 50 bps hikes should be expected for a period of time. Finally, she said that a potential recession would be short-lived and shallow. She predicted at least two more 50 bps hikes. The EUR/USD pair soared with the headline, peaking at 1.0735. However, Wall Street's soft opening revived growth-related concerns. US indexes plummeted, and the dollar soared, with EUR/USD currently trading at around 1.0620.
AUD/USD is down to 0.6690, while USD/CAD is up to 1.2670. USD/JPY, in the meantime, surged to 137.80.
Crude oil prices eased, with WTI settling at $76.10 a barrel. Gold trades at around $1,778 a troy ounce.
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